Palestra: Global Economic Perspectives From Crisis to Recovery - José Antônio Ardavin
Global Economic Perspectives From crisis to recoveryDiscussion on Prof. Edward Prescott ‘s Keynote Participation José Antonio Ardavín, OCDE Head of the OECD Mexico Centre for Latin America Expo Gestao Joinville, Santa Catarina, Brazil| 21 may 2010
The economic outlook has changed dramatically in a couple of weeksWhat were the perspectives in April 2010?
A recovery underway… (1) Financial conditions had improved markedlyNote: A unit decline in the index implies a tightening in financial conditions sufficient to produce an average reduction in the level of GDP by 1/2 to1% after four to six quarters. See details in Guichard et al. (2009).Source: Datastream; and OECD calculations.
(2) Industrial production is bouncing back strongly in emerging-market economies… Year-on-year percentage changesNote: Data for China are OECD estimates. Seasonally adjusted series for Brazil and China.Source: Datastream.
…significantly “pulling” the rebound in global trade1. Balance of respondents reporting an increase and a decrease in export orders.Source: OECD, Main Economic Indicator database; and OECD calculations.
(3) Industrial production bouncing back strongly in major OECD countries Year-on-year percentage changesSource: Datastream.
…and importantly, a significant rebound in business confidence Purchasing Managers’ IndexNote: Purchasing Managers Index: summary composite index based on the seasonally adjusted diffusion indices for five of the manufacturingsurvey indicators.Source: Markit Economics Limited; and OECD, Quarterly National Accounts database.
contexto internacional In sum: with varied speed and intensity, a road towards recovery Annualised quarter-on-quarter growth1 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 United States -6.4 -0.7 2.2 5.6 2.4 (+/-1.6) 2.3 (+/-1.4) Japan -13.6 6.1 -0.5 3.8 1.1 (+/-2.5) 2.3 (+/-2.7) Euro 32 -10.1 0.7 2.0 0.4 0.9 (+/-1.4) 1.9 (+/-1.5) Germany -13.4 1.8 2.9 0.0 -0.4 (+/-1.8) 2.8 (+/-1.8) France -5.3 1.4 0.7 2.4 2.3 (+/-0.9) 1.7 (+/-1.1) Italy -10.4 -1.9 2.1 -1.3 1.2 (+/-1.4) 0.5 (+/-1.6) UK -10.0 -2.7 -1.1 1.8 2.0 (+/-1.1) 3.1 (+/-1.2) Canada -7.0 -3.5 0.9 5.0 6.2 (+/-1.0) 4.5 (+/-2.0) G7 -8.8 0.4 1.4 3.7 1.9 (+/-1.5) 2.3 (+/-1.7)1. Based on GDP releases and high-frequency indicators published by 2 April 2010. Seasonally and in some cases also working-dayadjusted. The error ranges (in parentheses) associated with the point estimates reflect the differences between model-based projectionsand outcomes during 2003-07 using the latest available vintage of GDP and indicator data.2. The average of the three largest countries in the euro area (Germany, France and Italy).
…Nonetheless, a number of risks and challenges were pointed out since then by the OECD: (1) a new pattern of global imbalances emerging? Current account balance, in per cent of GDPSource: OECD, Quarterly National Accounts database; and OECD, Main Economic Indicators database.
…(2) plus fiscal disbalances!! General government balance, in per cent of GDPNote: Government balance for 2009 is an estimate for some countries. Countries are ranked according to the government balance in 2009.1. Mainland Norway only.Source: OECD, System of National Accounts database; and OECD Economic Outlook 86 database.
… y (3) plus, perdurable social effects of the crisis, with unemployment rates peaking in some countries Actual unemployment rate, in per cent of the labour forceSource: OECD, Main Economic Indicators database; and OECD Economic Outlook 86 database.
For Latin America, the main channel of transmission was the real economyFuente: OCDE Estudio Económico de México 2009
The recent crisis in the Euro Zone is simply another manifestation of the global financial crisis.In very broad terms both crises are about too much leverage: in the private sector first and now in the government sector.The first leg of the crisis saw private debt insolvency dealt with by transferring much of it onto the public balance sheet.With public solvency now being questioned by the markets, the room to keep putting things onto the “pay later” bill has diminished.
The new developments in Greece (and Europe) will very probably have an additional impact on the perspectives of Latin America1. Financial markets shift towards risk aversion in the forthcomming years2. The euro will not recover its strenght soon. Euro depreciation erodes competitiveness of Latin American products in Europe, particularly from Argentina, Brazil, Chile and Uruguay3. Slower growth in Europe will reduce demand for commodities and possible even US growth perspectives, with direct/indirect additional effects to Latin America
On the other hand…When the most advanced cars are in pitts… it is a good opportunity for those going behind to catch up.This is a moment of economic history that will be remembered by significant catch up of the developing world with respect to the advanced economiesEconomic growth will be powered by vibrant regions
Next week the OECD to release its updatedGlobal Economic Outlook www.oecd.org www.oecd.org/latinamerica www.oecd.org/brazil